Thanks to advances in medical technology, folks are generally living longer. This is great news. But it also doubles as an action item for investors, because the longer you live, the more you’ll need saved to provide for your spending needs in retirement. The question then becomes, what is the best way to calculate your life expectancy so you can plan retirement accordingly?
Everyone can likely agree that when it comes to retirement planning, it’s better to have saved too much than too little. By making a conservative estimate of you and your spouse’s life expectancies, you encourage yourself to save more and invest for longer, so that you can secure your income and spending needs throughout a long retirement. It’s a smart approach.
According to the Society of Actuaries, a 65-year-old man has a 41% chance of living to age 85 and a 20% chance of living to age 90. Ladies fare a little better than men, as a 65-year-old woman has a 53% chance of living to age 85 and a 32% chance of living to age 90.
If the man and woman are married, the chance that at least one of them will live to any given age is increased. There's a 72% chance that one of them will live to age 85 and a 45% chance that one will live to age 90. There's even an 18% chance that one of them will live to age 95!
The Social Security Administration has a life expectancy calculator on their website, but it simply asks for your gender and date of birth. As you know, the consideration of how long you expect to live should involve more factors than that.
You should also consider current health, your family’s medical history, and longevity in the family, amongst others. It won’t be perfect of course, but at least it will factor-in more detailed information.
A financial advisor should be able to help determine your life expectancy and incorporate it into your investment plan. You could even adjust your life expectancy a few times to see how your investment plan would be affected. . If you would like to have one of our Wealth Managers help you calculate an estimate of your life expectancy, please do not hesitate to give us a call. We’d be happy to help: 1-800-541-7774.
Sources:
1 Vanguard